12 November 2007 16:59 [Source: ICIS news]
LONDON (ICIS news)--Switzerland-based specialty and fine chemicals producer Clariant released a miserable set of third-quarter financial results last week.
The company’s share price plummeted 13% after it reported an unexpected net loss and operating profits down 90% (minus 30% before exceptionals).
The reasons for the declines were fundamental: a clear lack of pricing power in the market.
The trouble is that it does not look as though Clariant going to recover anytime soon. It has lost momentum. Price hikes of up to 30% were planned in July but have not borne fruit.
Clariant’s third-quarter sales were up 5% but price increases accounted for only one fifth of that.
The results came in well below expectations but analysts, such as those at Citigroup, don’t think the company will be able to hold on to gross margins for the rest of the year.
In a world of fluctuating energy prices and raw material costs, and a sharply lower US dollar, the specialty chemicals players face real problems.
As for players across the sector raw material costs have continued to rise as have energy costs. The weakening US dollar has hurt.
The financial markets understand this but don’t give managers any points for not moving fast enough. They also penalise heavily any unexpected negative news.
Can the rest of the industry catch a cold from the specialties makers and will some suffer the consequences?
It may not be too early to answer at least one of those questions.
Plastics maker Borealis on Monday admitted that it was more difficult now than at the start of the year to pass on raw material price increases.
At the top of the chain, cracker operators are concerned that they may not be able to keep pace with runaway naphtha costs. The non-integrated players in Europe and
So long as the polymer makers can continue to pass increased costs on in higher product prices, the sector as a whole is likely to hold its own. Once they start to lose momentum, however, the rot will set in.
Some analysts believe it may not be long before producers outside of specialties lose influence in the marketplace. When that happens the chemicals picture will look very different.
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